Unit3AccountingCycle

1/18LearningObjectives

Themainpurposeofthisunitistointroducetheknowledgeabouttheaccountingcycle.Afterlearningthisunit,youshouldbeableto:1. Identifywhatsourcedocumentsare.2. Knowtheclassificationofsourcedocuments.3. Describehowtheaccountingcycleworks.4. Identifydifferenttypesofjournals.5. Describethefeaturesofledgers.6. Identifybasicelementsofsourcedocuments.7. Masterthemainaccountingtermsrelatedtotheaccountingcycle.2/18LeadInLilyandMarrybuyacomputerfortheircompany.Theygettheinvoicefirstandhereisthedialoguebetweenthem.

L:Whatshallwedowiththeinvoice?M:First,weshouldhandittotheaccountant,andthentheaccountantwillpayusthemoney.L:Wherewilltheinvoicegothen?M:Theaccountantwillrecordtheamountinjournals,andafterthat,theamountwillbepostedintoledgers.L:Thentheitemtransactionwillbeseeninthefinancialstatements?M:Iknow.3/183.1AccountingCycle

Beforewestarttolearnthebasicprocessofaccountingcycle,it’snecessarytohavesomeknowledgeoftheaccountingsourcedocuments.Theyarethebeginningofanaccountingcycle.Sourcedocumentsareoriginaldocuments,whichrecordtheoccurrenceandcompletionofeconomictransactions.Theyareusuallyfilledinbythebusinessclerks,accordingtotheprocessofeconomictransactions.Therearemanykindsofsourcedocuments,andthepatternsaredifferentfromoneanother.Evenso,therearesomegeneralelementsinsourcedocuments:(1)nameofsourcedocument;(2)fillingincompanyordepartment;(3)dateandnumbers;(4)companyorpersonthat4/18receivesthedocument;(5)digestoftransaction;(6)amount,priceandsum.Generallyspeaking,therearetwokindsofsourcedocumentsinuse.Theyaretheexternalsourcedocumentsandtheinternalsourcedocuments.Internalsourcedocumentscontain:(1)one-offdocument;(2)accumulateddocument;(3)collectedsourcedocument.Theyexistfordifferentuses.Fillinginorgettingthesourcedocumentsisthestartofanaccountingcycle.Accountingcycleisasequenceofaccountingprocedureswhichincluderecording,classifyingandsummarizingtheaccountinginformation.Generallyspeaking,thewholeaccountingcycleincludesthefollowingsteps:5/18Economictransactionsandsourcedocuments:Whenaneconomictransactiontakesplace,thebusinessmanwritesaccountingsourcedocuments,onecopyfortheseller,onecopyforstub,andthelastonefortheaccountant.Journalizing:Theaccountantrecordsthistransactionintorelatedjournal.Posting:Thisstepistoposttheaccountinginformationtogeneralandsubsidiaryledgers.Thefirstthreestepsaredonewheneveratransactionhappens.Adjusting:Afteralltransactionsarecollected,atrialbalancesheetismade.Duringanaccountingperiod,therewillbesomeaccrualordeferredtransactions.Accordingtothematchingprinciple,6/18it’snecessarytoadjusttheseitemsattheendofamonth,aquarterorayear.Here,anadjustedtrialbalanceneedstobemade.Preparingfinancialstatements:OnDecember31,everycorporationshouldprovidethefinancialstatementsonthebasisofadjustingentries.ClosingandReversing:Attheendofeachaccountingperiod,thebalanceofeveryprofitandlossaccountmustbezero.Sothelaststepisclosing.Usuallyan“IncomeSummary”isusedinthisstep.Theresultofthisstepisapost-closingtrialbalance.Atthebeginningofanewaccountingperiod,reversethedeferredoraccrualitemstothebeginningbalance.Then,anotheraccountingcyclebegins.Wecandemonstratethewholecycleasfollows:7/18Figure3-18/18Activity：Discussaboutthefollowingquestionwithyourpartner.Whathaveyoulearnedfromtheaccountingcycle?3.2Journals

Inanaccountinginformationsystem,theinformationabouteachbusinesstransactionisinitiallyrecordedinanaccountingrecordcalledaccountingjournal.Thejournalisaday-to-dayrecord.Itisalsocalledthebookoforiginalentry,recordingeachbusinesstransactioninorderofdate.Theprocessofrecordingdatainajournaliscalledjournalizingormakingajournalentry.Atconvenientaccountingintervals,maybeonemonth,thedebitandcreditamountsrecordedinthe9/18journalarelaterpostedtorelatedledgers.Theledgerwillbeexplainedlater.Manybusinessesmaintainseveralkindsofjournals.Thesimplesttypeiscalledgeneraljournal.Thegeneraljournalcanbeusedtorecordalltypesoftransactions.Itcontainsthedateofatransaction,thesortandthenumberofthedocument,thedigest,relateddebitandcreditledgers,andtheamount.Inadditiontothegeneraljournal,thereisanothertypeofjournal,thespecialjournal.Thespecialjournaliswidelyusedtoregistersomespecificbusinesstransactions.Themostcommonlyusedarecashreceiptjournal,cashpaymentjournal,salesjournalandpurchasejournal.InChina,thecashreceiptjournalandcashpaymentjournalarewidelyusedalloverthecountry.10/18Figure3-2BankDepositJournalYearDocumentDigestOppositeAccountDebitCreditBalanceMonthDateTypeNo.Dec.1thOpeningBalance5,000Dec.3thBankdepositpayment1WithdrawforuseCash6004,400Dec.5thBankdepositreceipt3ReceivesfromaccountsreceivableAccountsReceivable3,0007,400Dec.12thBankdepositpayment15PaymentforWagesWagesPayable1,2006,200Total6,20011/18Figure3-3CashJournalYearDocumentDigestOppositeAccountDebitCreditBalanceMonthDateTypeNo.Dec.1thOpeningBalance4,000Dec.3thCashreceipt1WithdrawforuseBankDeposit6004,600Dec.5thCashpayment2ExpenseforwaterandelectricityAdministrativeExpenses3,0001,600Dec.12thCashpayment15PaymentforWagesWagesPayable6001,000Total1,00012/18Activity：Discussaboutthefollowingquestionwithyourpartner.What’syouropinionofjournals?3.3LedgersInunit2wehavelearnedtheknowledgeaboutaccount.Accountantsrecordtransactionsinthecompany’saccounts.Anaccountisameansofrecordingallinformationaboutchangesinasset,liabilityandowner’sequityitems.Forconvenientaccesstotheinformationintheaccounts,thepagesaregatheredinasinglebook.Thenumerousaccountsinthebookarecalledledgeraccounts.Accordingtomanagementrequirements,therearetwotypesofledgersinordinaryuse:generalledgerandsubsidiary13/18ledger.Thereisarelationshipbetweenthetwotypes:Thebalanceofgeneralledgerisequaltothesumofbalancesinsubsidiaryledgers.Soforthesametransactioninthesameaccountingperiod,it’srequiredtorecordthesameamountandthesamedebitandcreditentryinbothgeneralledgerandsubsidiaryledger.Figure3-4ExpenseSubsidiaryLedgerYearDocumentNumberDigestDebitCreditBalanceMonthDateTotal14/18Activity：Discussaboutthefollowingquestionswithyourpartner.Whatdoyouthinkaboutledgers?What’stherelationshipbetweenjournalsandledgers?Notes&Grammar

1.Sourcedocumentsarebasicdocuments,whichrecordtheoccurrenceandcompletionofeconomictransactions.原始憑證是統(tǒng)計經(jīng)濟(jì)業(yè)務(wù)發(fā)生和完成情況基本單據(jù)。這里which引導(dǎo)句子為定語從句，修飾先行詞documents，它補充說明了原始憑證在會計循環(huán)過程中作用——統(tǒng)計經(jīng)濟(jì)業(yè)務(wù)發(fā)生和完成情況。15/182．IncomeSummary損益匯總科目。這個科目標(biāo)作用是結(jié)轉(zhuǎn)本期損益類賬戶余額。在會計期間內(nèi)